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Illustration: Lazaro Gamio / Axios

If CVS makes a formal offer to buy Aetna, it will represent an attempt to stave off any future drug supply chain competition from Amazon and fight the growing incumbent power of UnitedHealth Group.

Between the lines: The CVS-Aetna merger is "more defensive than offensive," Leerink Partners analyst Ana Gupte told investors.

The Amazon angle: Amazon's potential entry into drug distribution spurred CVS to consider acquiring Aetna, the Wall Street Journal reported.

  • CVS previously expressed concerns about Amazon as well as confidence it still had the edge.
  • "Amazon's a respected competitor. You don't take anything lightly that they may be doing. That said, pharmacy is not a commodity business...it's a highly regulated industry," CVS CEO Larry Merlo said at a May industry conference.
  • CVS is more than just its pharmacy stores. Its biggest business is its role as a pharmacy benefit manager, which negotiates drug prices and creates lists of covered drugs for employers and insurers.
  • Operating pharmacies and being a pharmacy benefit manager are a lot more complicated than selling and shipping consumer goods. Acquiring another highly regulated business, like Aetna and its health insurance products, would create more distance between CVS and Amazon.

The UnitedHealth angle: CVS also approached UnitedHealth about merging, the Wall Street Journal reported. It's easy to see why.

  • UnitedHealth's integrated model — being a large health insurer, pharmacy benefit manager and provider under one roof — has served as the health care blueprint for larger growth and gigantic earnings.
  • UnitedHealth's pharmacy benefit manager, OptumRx, has won many big contracts over CVS.
  • There likely would be more antitrust issues by merging with UnitedHealth, but creating a bigger competitor is CVS' next best option.

Go deeper

S.C. governor orders end to federal COVID-related unemployment benefits

Photo: Micah Green/Bloomberg via Getty Images

South Carolina Gov. Henry McMaster (R) on Thursday ordered the termination of the state's participation in all federal, pandemic-related unemployment benefit programs.

Driving the news: McMaster cited labor shortages, but some experts say it's the job climate and not unemployment benefits that is determining the pace at which people are returning to work.

Dave Lawler, author of World
7 mins ago - World

Mixed response in Europe to Biden's vaccine patents bombshell

Illustration: Aïda Amer/Axios

The Biden administration surprised the world last night by coming out in favor of waiving patents for coronavirus vaccines — but Europe is divided on the issue.

What they're saying: European Commission President Ursula Von Der Leyen said Brussels would be willing to discuss it; French President Emmanuel Macron said he backed the U.S. position, but a German government spokesman said the proposal would cause "severe complications" for vaccine production.

Updated 19 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Rae Cook/Axios

  1. Health: CDC expects new COVID surge starting this month — Coronavirus cases hit a seven-month low
  2. Politics: Federal judge overturns CDC's eviction moratorium — Why Biden's latest vaccine goal is his hardest yet.
  3. Vaccines: Moderna says its COVID booster shot shows promise against variants — U.S. will support waiving vaccine patents — Education secretary: All schools expected to be fully in-person this fall
  4. Economy: U.S. may have added more than 2 million jobs in April — A surge in youth unemployment.
  5. World: True COVID-19 death toll is double the official numbers, study finds — Countries testing J&J vaccine doses after contamination at Baltimore plant — Germany opposes Biden's support for waiving vaccine patents
  6. Variant tracker: Where different strains are spreading.